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“Dollars, dollars.” Under the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country accustomed to holding the US dollar.

“The best time for purchasing is now,” says one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency once the election concludes. The president has placed a cap on the peso to control triple-digit inflation and now it is overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, in the form of the influential Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to wrestle back command of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to control inflation in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Only large-scale economic support from abroad has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he lately dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as planning to bring back austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head is often a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, these leaders tend to be good at holding on to power, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.